HEAL Committee Meeting

Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.

For an advanced search, use Publication Search tool.

If you have any questions or comments regarding the accessibility of this publication, please contact us at accessible@parl.gc.ca.

Previous day publication Next day publication

37th PARLIAMENT, 2nd SESSION

Standing Committee on Health

EVIDENCE

CONTENTS

Tuesday, September 23, 2003

0905

The Chair (Ms. Bonnie Brown (Oakville, Lib.))

Ms. Barbara Ouellet (Director, Quality Care, Technology and Pharmaceuticals Division, Health Care Strategies and Policy Directorate, Health Policy and Communications Branch, Department of Health)

0910

0915

0920

0925

The Chair

Ms. Barbara Ouellet

The Chair

Mr. Rob Merrifield (Yellowhead, Canadian Alliance)

Ms. Barbara Ouellet

Mr. Rob Merrifield

Ms. Barbara Ouellet

Mr. Rob Merrifield

Ms. Barbara Ouellet

Mr. Rob Merrifield

Ms. Barbara Ouellet

0930

The Chair

Mr. Grant Hill (Macleod, Canadian Alliance)

Ms. Barbara Ouellet

Mr. Grant Hill

Ms. Barbara Ouellet

Mr. Grant Hill

Ms. Barbara Ouellet

Mr. Grant Hill

The Chair

Mr. Réal Ménard (Hochelaga—Maisonneuve, BQ)

0935

Ms. Barbara Ouellet

Mr. Réal Ménard

Ms. Barbara Ouellet

Mr. Réal Ménard

0940

Ms. Barbara Ouellet

The Chair

Mr. Réal Ménard

The Chair

Ms. Carolyn Bennett (St. Paul's, Lib.)

Ms. Barbara Ouellet

Ms. Carolyn Bennett

Ms. Barbara Ouellet

Ms. Carolyn Bennett

0945

Ms. Barbara Ouellet

The Chair

Mr. Gilbert Barrette (Témiscamingue, Lib.)

Ms. Barbara Ouellet

Mr. Gilbert Barrette

0950

Ms. Barbara Ouellet

The Chair

Ms. Hedy Fry (Vancouver Centre, Lib.)

Ms. Barbara Ouellet

Ms. Hedy Fry

Ms. Barbara Ouellet

The Chair

Mr. Rob Merrifield

Ms. Barbara Ouellet

The Chair

Mr. Jeannot Castonguay (Madawaska—Restigouche, Lib.)

0955

Ms. Barbara Ouellet

Mr. Jeannot Castonguay

Ms. Barbara Ouellet

The Chair

Mr. Réal Ménard

Ms. Barbara Ouellet

Mr. Réal Ménard

The Chair

Dr. Robert Elgie (Chairperson, Patented Medicine Prices Review Board)

1005

1010

The Chair

Mr. Rob Merrifield

1015

Dr. Robert Elgie

Mr. Rob Merrifield

Dr. Robert Elgie

Mr. Rob Merrifield

Dr. Robert Elgie

Mr. Rob Merrifield

Dr. Robert Elgie

Mr. Rob Merrifield

Dr. Robert Elgie

Mr. Rob Merrifield

Dr. Robert Elgie

Mr. Rob Merrifield

Dr. Robert Elgie

Mr. Rob Merrifield

The Chair

1020

Mr. Grant Hill

Dr. Robert Elgie

Mr. Grant Hill

Dr. Robert Elgie

Mr. Grant Hill

Dr. Robert Elgie

Mr. Grant Hill

Dr. Robert Elgie

Mr. Grant Hill

Dr. Robert Elgie

Mr. Grant Hill

Dr. Robert Elgie

Mr. Grant Hill

1025

Dr. Robert Elgie

Mr. Grant Hill

Dr. Robert Elgie

Mr. Grant Hill

The Chair

Mr. Réal Ménard

Dr. Robert Elgie

Mr. Réal Ménard

Dr. Robert Elgie

Mr. Réal Ménard

Dr. Robert Elgie

1030

Mr. Réal Ménard

Dr. Robert Elgie

The Chair

Ms. Hedy Fry

Dr. Robert Elgie

1035

Ms. Hedy Fry

Dr. Robert Elgie

Ms. Hedy Fry

Dr. Robert Elgie

The Chair

Dr. Robert Elgie

The Chair

Dr. Robert Elgie

1040

The Chair

Dr. Robert Elgie

The Chair

Dr. Robert Elgie

The Chair

Dr. Robert Elgie

The Chair

Dr. Robert Elgie

The Chair

Dr. Robert Elgie

1045

The Chair

Mr. Rob Merrifield

The Chair

Ms. Carolyn Bennett

Dr. Robert Elgie

Ms. Carolyn Bennett

Dr. Robert Elgie

Ms. Carolyn Bennett

Dr. Robert Elgie

Ms. Carolyn Bennett

Dr. Robert Elgie

The Chair

Dr. Robert Elgie

The Chair

The Clerk of the Committee (Mr. José Cadorette)

The Chair

The Clerk

The Chair

1050

The Clerk

The Chair

Ms. Carolyn Bennett

The Chair

Ms. Carolyn Bennett

The Chair

Ms. Carolyn Bennett

Ms. Hedy Fry

Ms. Carolyn Bennett

Ms. Hedy Fry

Ms. Carolyn Bennett

Ms. Hedy Fry

The Chair

Ms. Carolyn Bennett

The Chair

Ms. Carolyn Bennett

The Chair

Ms. Carolyn Bennett

The Chair

Ms. Carolyn Bennett

The Chair

CANADA

Standing Committee on Health

NUMBER 045

2nd SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, September 23, 2003

[Recorded by Electronic Apparatus]

¿ (0905)

[English]

The Chair (Ms. Bonnie Brown (Oakville, Lib.)): It's my pleasure to call this meeting to order. This is the third meeting of the Standing Committee on Health's prescription drug study. This morning we are happy to welcome, in the first hour, witnesses from the Department of Health, Ms. Barbara Ouellet, the director of the health services division, and Mr. Wayne Lepine, manager of pharmaceutical policy.

We'll begin with whoever you designate as your first speaker.

Ms. Barbara Ouellet (Director, Quality Care, Technology and Pharmaceuticals Division, Health Care Strategies and Policy Directorate, Health Policy and Communications Branch, Department of Health): Thank you.

I understand that what you're interested in knowing from the policy branch is some of the work we have been undertaking, some of the key factors contributing to rising drug costs, and what the federal government is doing in this regard. I have a short deck--and I hope copies have been made available to committee members. With your permission, I'll go through this deck and then I'd be pleased to answer any questions you may have.

The health policy and communications branch is generally responsible for policy advice to the Minister of Health on federal and federal-provincial roles and priorities in the area of health care, in particular the area of pharmaceutical policy. Much of the focus of our work currently is to move forward on the commitments that were laid out by the first ministers in the September 2000 agreement on health and the February 2003 first ministers' accord on health care renewal.

Just to clarify the provincial roles and responsibilities, first of all, the Canada Health Act requires that pharmaceuticals that are used within hospitals be fully funded on a first-dollar basis along with other hospital services and physician services that are medically necessary. Outside of hospitals, however, jurisdictions may choose to provide additional insured benefits, including the coverage of community-based pharmaceuticals. In fact, all jurisdictions do provide pharmaceutical coverage to some degree. They are free, however, to determine who will be the eligible recipients for pharmaceutical benefits, the level of coverage, and the range of pharmaceutical products included on the formularies for coverage.

I've included in the deck some of the pertinent excerpts from the accord that lay out essentially the direction we are pursuing in policy terms. First ministers agreed to continue work with respect to pharmaceuticals management, and this is essentially focused on strategies and collaborative activities to assess and promote cost-effective utilization of pharmaceuticals. This work could include examination of best practices and various means of addressing overall drug costs.

In February 2003, the first ministers also identified a new priority and that was to work together to ensure Canadians suffer no undue financial hardship in accessing needed drug therapy. The commitment in the accord is that they will take measures by 2005-06 to ensure Canadians do have access to catastrophic drug coverage.

The 2003 accord also reiterated the priority with respect to pharmaceuticals management. They have directed us to look at best practices in prescription drug utilization and the overall management of costs of drugs, including non-patented drugs or generics.

Just to conclude some of the highlights of the first ministers' agreement, there was a significant section of the agreement that dealt with reporting to Canadians--reporting, obviously, in regard to all of the priorities that were identified in the accord. In addition, first ministers actually suggested some indicators that could be used, and these are attached to the accord. This reporting is to commence in 2004.

So in terms of some of the concerns we are looking at with respect to policy analysis, we are aware of the rising costs of drugs--and I'll talk more about that in a minute. We are concerned that pharmaceuticals be prescribed in an appropriate manner and utilized appropriately by Canadians.

Obviously, suboptimal access to pharmaceutical therapies is another concern we have, and this is most pressing for certain residents in the Atlantic provinces who do not have access to public drug benefits programs. The next slide gives you some indication of the rise in drug costs in Canada over more than the last 15 years. We've identified non-prescribed and prescribed drugs to clarify the status of the drugs.

In 1985 Canadians spent $3.8 billion on pharmaceuticals, which represented 9.5¢ out of every health care dollar. By 2002, Canadians were spending about $18.1 billion on pharmaceuticals, and this represented about 16.2¢ out of every health care dollar. So over this period, as the graph attempts to illustrate, prescription drug increases actually grew faster than non-prescription drug increases. In fact, in 1985 the prescription drug share of total expenditures was 67.5%, but by 2002 it was 80.3%.

We have done considerable work to attempt to analyze some of the cost drivers, and I would mention that in the late 1990s we undertook a memorandum of understanding with the Patent Medicine Prices Review Board--which you will be hearing from next--to undertake research on trends in prices and costs of pharmaceuticals as well as to try to unravel some of the factors contributing to those costs. A series of studies was produced; these are available on PMPRB's website.

The studies showed that the key factors behind rising drug expenditures are primarily increased utilization of drugs and spending on new, more expensive pharmaceuticals. The example we've chosen from British Columbia indicates the impact of these two cost drivers.

In British Columbia, these two factors accounted for 82% of the rise in B.C. pharmacare costs over the period 1990 to 1997, with utilization accounting for 50% and spending on new drugs about 32% of that increase.

What is the impact of rising drug costs? We certainly appreciate that new drugs can result in improved health outcomes for Canadians, either as a result of better treatment for existing conditions or new treatments for conditions for which there may not previously have been drug therapies. However, we also know most of these newly introduced drugs may contribute only minimal improvements over existing treatments but do cost significantly more, and this is certainly a concern expressed by the drug plans, federal and provincial.

As a result of the agreements of first ministers, federal-provincial officials have been collaborating in a number of areas. I've chosen five to highlight the scope of the work we're undertaking.

One of the initiatives has been to establish a single, common drug review process for all participating drug plans. I indicate “participating” because at this point Quebec has not chosen to participate in the common drug review.

The decision to move forward with this common drug review was announced by health ministers in 2002, and at their meeting at the beginning of this month they announced the launch of the common drug review process. I'll go into this process in a minute in terms of further details.

The second initiative has been the national prescription drug utilization information system, the NPDUIS for those of us who like acronyms. This was also agreed to by health ministers in September 2001 and is a partnership between the Canadian Institute for Health Information and the Patent Medicine Prices Review Board. I'll highlight more of that as well in a minute.

¿ (0910)

The third initiative is the Canadian optimal medication prescribing and utilization service or system. This initiative is still under development. The goal of this initiative is to facilitate the efforts of provinces and territories and federal drug plans in promoting appropriate utilization and in gathering information on best practices in doing so.

The fourth initiative has to do with the harmonization of generics. What this means is that Health Canada issues a declaration of bio-equivalence with respect to generics relative to the patent reference drug. In many provinces, this declaration of bio-equivalence by Health Canada is then used as the basis for declaring interchangeability at the practice level. It's not absolutely uniform across the country. We're working with the provinces to ensure that there is more comfort with Health Canada's declaration in order for them to then declare interchangeability.

Finally, we are currently embarking on further work to examine in more detail the potential excessive prices of non-patented drugs, which are not regulated by the Patented Medicine Prices Review Board.

The next few slides provide further details on these initiatives, which I won't go through in complete detail. But just with respect to the common drug review, prior to its implementation, every federal and provincial drug plan was responsible for its own review of therapeutic evidence of the effectiveness and cost-effectiveness of new drugs. That meant there was considerable duplication across the country in reviewing evidence from clinical trials and other information. The common drug review process is intended to streamline that and to bring the level of analysis of all jurisdictions up to a common rigour.

The result of the common drug review process will be a single recommendation to drug plans about the therapeutic and cost-effectiveness of new chemical entities. The decision as to whether or not to list these new drugs still rests with each individual drug plan, recognizing that there are other considerations, including their beneficiaries, the nature and fit with their own program design, and affordability concerns that may exist within individual plans.

With respect to the national prescription drug utilization information system, the purpose is to allow us to have an information base that can contribute to policy analysis and answer some key questions we have with respect to costs, trends, and utilization factors. Slide 16 highlights some of the questions that we believe this information system will enable us to answer over time. We are still in the process of establishing the database, but the Patented Medicine Prices Review Board is already beginning, with the assistance of a steering committee of federal-provincial representatives, to scope out some of that analytical work.

With respect to the Canadian optimal medication prescribing and utilization service, as I said, this initiative is still under development. It's intended to respond to the Health ministers' agreement that there is an opportunity for jurisdictions to work together to determine the best ways of influencing or intervening at the level of prescription and utilization to ensure that the most appropriate drugs are provided and, therefore, that the benefits of drug plans are being used in the most appropriate and cost-effective manner.

Slides 17 and 18 provide you with a little bit more information as to what we expect COMPUS will do once implemented—although this decision has not yet been fully taken.

¿ (0915)

With respect to the harmonization of generics, this is really in response to a decision, a statement, by premiers in January 2002 that they would want to further streamline the listing of generics. The reason was to accelerate the listing of these generics on their drug plans by reducing some of the duplication of analysis that may be happening in the provinces when it has already been done by Health Canada. We have seen some progress since this initiative was announced by premiers, but we have not yet got to the point where listings are completely harmonized with the declarations of Health Canada.

With respect to non-patented drug price regulation, we are concerned that the studies I mentioned earlier, studies the Patented Medicine Prices Review Board conducted for us during the 1990s, identified that for both non-patented single-source medicines and multiple-source medicines, otherwise known as generics, the prices of these products in Canada did appear to be excessive relative to comparable countries, or at least higher than the median. With respect to patented drugs, the regulation of those drugs through PMPRB has been successful in bringing Canadian prices down to about the median for these countries, so we feel there is potential to go further to try to address the prices of non-patented single-source and generic drugs.

The study we are embarking on will go a little further in the analysis for us to try to understand not just what the nature of the price differentials are but the reasons for those price differentials, which are potentially related to the generic industry in Canada or other market factors in Canada that are somewhat different from those in other countries. In addition, together with the provinces, we have considered the possible options for regulating these non-patented drugs all the way from initiatives individual jurisdictions could take on their own to regulate drugs, because the regulation of these drugs is provincial jurisdiction, through to perhaps a collaborative mechanism involving provincial and territorial governments collectively or to other means that involve the PMPRB, such as enhanced reporting of the prices of non-patented drugs, which may in and of itself have some moral suasion potential. And finally, there is the possibility that provincial governments could, through legislation, upwardly delegate the regulation of non-patented drugs to the Patented Medicine Prices Review Board.

We have taken no decision on the preferred option with respect to these policy directions. Part of what this study will do is to further investigate the potential benefits of each of these options and some of the implications of moving forward, and it will make some further recommendations as to how to potentially proceed with one or more of these options.

Slide 22 I have included not to attempt to make this look overly complicated but to indicate that all of these initiatives, taken together, are really intended to provide us with a comprehensive policy approach to the management of pharmaceuticals. I won't go into detail, but what we see is that the management of pharmaceuticals is really cyclical. It starts with the approval by Health Canada of the new drug for sale in Canada and the assessment of the price of those new drugs, if they're patented, by PMPRB. Their effectiveness and their cost-effectiveness are assessed by the new common drug review, and the various drug plans take decisions to list or not to list.

What we've tried to do as well, then, through the Canadian optimal medication prescribing and utilization service, through some of our other work that will be accomplished through enhanced health technology assessment, and through a new contribution program we are implementing at Health Canada, is to try to make sure that in the post-market environment we have the best evidence possible to try to influence the appropriate use of these medicines. Then, of course, our post-approval surveillance system will help further to determine any adverse events and the effectiveness of these drugs. And as I've mentioned, the initiative with the national prescription drug utilization information system will capture all of that information, costs, utilization, trends, and allow us again to influence policy directions as is appropriate.

¿ (0920)

Canada is not alone in the initiatives we have taken in this regard. Most countries, particularly OECD countries, have also moved in these directions, directions related to price regulation--there are various ways in which that's happening--control over which drugs are publicly insured; in some cases, price-volume contracts with industry; certainly cost-effectiveness evaluations; and their own initiatives, such as we have through COMPUS, to try to influence use.

So, Madam Chair, that's an overview of the kind of policy work we have been doing in this regard. I'd be pleased to answer any questions the committee may have.

¿ (0925)

The Chair: Thank you very much, Ms. Ouellet.

I assume Mr. Lepine will answer questions as well.

Ms. Barbara Ouellet: Yes, I will call on him as I need to.

The Chair: We'll begin the questioning with Mr. Merrifield.

Mr. Rob Merrifield (Yellowhead, Canadian Alliance): Thank you, Madam Chair.

Thank you for coming in and going through this information. It was rather quick and comprehensive, so there's a lot here to absorb.

I was interested in a trend I saw with regard to the price of drugs, as you have it in the one slide, and how that has escalated. To start with, do you see that trend relaxing or increasing as we move forward over the next five to ten years? What do you see coming at us with regard to price and use, and why do you see it?

Ms. Barbara Ouellet: I think the Patent Medicine Prices Review Board in their presentation will give you more detail on prices. Certainly, with respect to prices, we remain comparable to the countries we choose to compare with. However, as I indicated, there are essentially three factors that contribute to cost increases. The price for patented medicines has been controlled and remains about the median of international comparable countries. Use, however, has been increasing. In part, this is because of the potential of new drugs to treat illnesses that were previously untreatable or as therapies added to existing drug regimes. Cost is also influenced when the basket of insured drugs as a whole has higher prices. As more and more new drugs are added to that basket, even though their prices are controlled, they are more expensive than perhaps older treatments, which may be no longer insured.

So the overall cost of the basket has been increasing. In many jurisdictions most of the drugs the costs of which are being reimbursed today weren't even on the market five years ago. The uptake we're seeing with these new drugs has a cost influence as well.

Mr. Rob Merrifield: I think you've actually illustrated and described exactly why we saw the trend up to today. I understand that. I just want to know where we are going to be five years from now, ten years from now. Are we going to see that graph continue to escalate on both use and price?

Ms. Barbara Ouellet: I think, as slide 9 indicates, the trend is steadily increasing. We've not seen any indication at this point that the year-over-year increases in drug expenditures are changing.

Mr. Rob Merrifield: When I talked with some of the pharmaceutical companies about their research, especially on the patented side, it appeared to me--correct me if I'm wrong--there may be a point where a lot of them have been patented and have come onto the market in the last little while, and we may not be seeing quite as many as we move ahead. But I'm just not sure about that. I certainly understand that the trend is for these more expensive drugs. That's what's driving the cost, and consumers want it. I don't know if you see that, if that's true or not.

Ms. Barbara Ouellet: I have no evidence of that. But perhaps when the PMPRB makes its presentation, as that is the group that receives the submissions and is regulating the prices, they may have some information in that regard.

Mr. Rob Merrifield: I'll ask them those questions.

Recapturing what you said, as far as patented drug prices in Canada are concerned, we're competitive with other countries. It's the non-patented ones in which we are seeing some escalation in price compared to other countries.

Ms. Barbara Ouellet: What we've done through the study is not really a trend analysis. We've compared the prices of generics and non-patented single-source drugs in Canada relative to other countries that we believe should be somewhat similar to Canada. That has shown that proportionately our prices are higher. Because we have controlled the prices of our patented drugs, that isn't evident without some further analysis. Part of what we want to do is to determine, as you've suggested, what really are some of the trends with regard to those prices. Our analysis has really been a comparison of today's prices relative to those of other countries and then to determine if there are particular aspects of the market in Canada that are influencing the prices of generics here differently from in other countries and to understand if there is the potential to reduce the gap, much as we did through the implementation of the PMPRB to reduce the gap and to bring Canadian non-patented drug prices more in line with the international median.

¿ (0930)

The Chair: Thank you.

Will it be Mr. Hill or Ms. Hinton? Mr. Hill.

Mr. Grant Hill (Macleod, Canadian Alliance): Thank you.

Thanks for your presentation.

With regard to your slide 9 on rising drug costs in Canada, could you make a comment about the rising drug costs in comparable countries? If we took the same basic mechanism and looked at comparable countries, how would they stack up?

Ms. Barbara Ouellet: We don't have those figures for you, but we will try to provide them to the committee. What we do know is that all countries are facing similar kinds of cost pressures. The same kinds of factors that are influencing our increases in expenditures, as I've mentioned, including utilization increases and generally more expensive baskets as there has been more uptake of new drugs, are affecting other countries. So I would suspect, although I don't have the figures here, that the picture in other countries is probably similar.

Mr. Grant Hill: I think you're accurate. My research shows that comparable countries have virtually the same per capita increases in pharmaceutical costs.

My second question refers to slide 12. It's quite provocative to say that most newly introduced products have minimal improvements over existing treatments. There are some products that are evergreening, and I recognize that. But can you give me an example of a newly introduced product that you consider to have minimal improvements--just one?

Ms. Barbara Ouellet: I'm not able to give you an example today. The data with regard to clinical effectiveness are assessed by our regulatory branch. As well, the Patented Medicine Prices Review Board will take into account potential breakthrough drugs as they do their price guideline analysis. I can find the source of this statement and provide it to the committee. But I'm not able to give you an indication of one particular drug that I believe has minimal value.

Mr. Grant Hill: This is a pretty broad statement. I recognize that many physicians in this country are given their information on new products by the companies themselves. I don't think that's the best way for physicians to get information on new pharmaceuticals. I've long felt that an academic approach to new drugs would be superior to depending upon the companies themselves. But when you make such a statement and don't have something to back it up, that statement, in my view, is a troubling one. If you can back it up, I'd love to see that information.

Ms. Barbara Ouellet: We do have that information. I just don't have it here today. I'd be happy to provide, as I say, the source of the statement and the evidence behind it to the committee.

Mr. Grant Hill: All right. Let me leave it at that. I will look for that information from you, please.

Thanks.

The Chair: Thank you.

Mr. Ménard.

[Translation]

Mr. Réal Ménard (Hochelaga—Maisonneuve, BQ): Madam Chair, perhaps you will be magnanimous enough to credit Svend Robinson's time to my account, seeing that he is absent. I have many questions for the witnesses.

First of all, in your presentation, you implied that the federal government was responsible for approving patented drug prices, while the provinces were responsible for approving generic drug pricing. I think that statement is not entirely accurate. Officials who testified before us earlier explained that a notice of compliance was required for generic drugs as well as for patented drugs. No one should be under the impression that the provinces approve generic drugs in Canada. Correct me if I'm wrong on this.

Secondly, we're faced with a paradox and fundamentally, that's goes to the heart of the committee's work. The Patented Medicine Prices Review Board, a body set up by the Conservatives under Brian Mulroney, determines the ex factory price of a drug. Pharmaceutical companies maintain that drug costs haven't risen in Canada. They're right when it comes to the manufacturer's sale price. The paradox lies in the fact that the retail price has increased. Have prices increased because wholesalers, pharmacists and the other intermediaries are taking a bigger slice of the pie, or because research costs have risen? That is the question that needs to be answered, and you've provided some explanations this morning. Would you agree with me that no one in Canada regulates the retail price, whereas the ex factory price, that is the manufacturer's sale price, is in fact regulated? I'll put the same question to Mr. Sureau and to Mr. Elgie later.

Thirdly, the fact that generic drug prices are not regulated by the Patented Medicine Prices Review Board is utterly ridiculous. That needs to change. Generic drug prices are 30 per cent higher in Canada than they are in the United States. Have you examined this issue and can you give us any additional information by way of an explanation?

For my final question, the Government of Quebec is a party to the range of initiatives that you mentioned. Information is exchanged with the Quebec government, even though it did not sign the Social Union Framework Agreement.

¿ (0935)

[English]

Ms. Barbara Ouellet: Let me start with your second question. I may have to ask you to restate your first question as the translation was not helpful. It was much easier to hear you speaking in French as opposed to the translation.

With respect to the actual retail price of pharmaceuticals, it's true that there are a number of factors that contribute to it: the factory price of the medication, the actual dispensing fees that may be attached to that, and possibly other markups. Dispensing fees do vary across the country. Those are negotiated between the pharmacist associations and the governments, as far as the drugs that are reimbursed are concerned, so there can be considerable variability. It's true that the factory price is not necessarily the price that Canadians do pay.

[Translation]

Mr. Réal Ménard: However, retail sales are not regulated. According to the existing regulatory framework, ex factory prices are regulated, that is to say the ex factory price cannot exceed the median price or, in the case of an old drug that has been manufactured in a new format, the price cannot exceed the rate of inflation. However, retail sale prices are not regulated and no one can control pricing at that stage. Ontario has frozen drug prices under an agreement with its professionals and pharmacists, but it's wrong to imply that the Patented Medicine Prices Review Board controls prices. It regulates the ex factory price, that is the manufacturer's sale price. Do you concur with that statement?

[English]

Ms. Barbara Ouellet: The potential to control prices at the retail level does exist within the provincial drug plans. There are arrangements, as I said, where the dispensing fees are negotiated with the pharmacist associations in order to manage that; they're not completely open-ended.

At the same time, as drugs are introduced into individual provinces, the province may choose to negotiate with the manufacturer of that drug what the overall cost will be.

[Translation]

Mr. Réal Ménard: I understand. Let's move on as the clock is ticking.

We need to ask ourselves a question. In last year's report, and I've read every single annual report since the Board's inception, the Patented Medicine Prices Review Board discussed 64 new drugs approved for human consumption. I'm not talking about drugs approved for use on animals. Drugs are classified as schedule A, B or C drugs. According to the Board's own figures, it seems that only 10 per cent of drugs for which a notice of compliance is issued in Canada have new therapeutic value. Do you agree with that statement?

Do you agree that one cost driver is the fact Health Canada approves drugs with very little in the way of new therapeutic value? According to the federal-provincial-territorial study, a paper that I've already read but that should be circulated to all members, drug costs escalate by 50 per cent in the two years following the drug's arrival on the market. Why does Health Canada approve drugs with marginal new therapeutic value?

¿ (0940)

[English]

Ms. Barbara Ouellet: With respect to the PMPRB information, I'm not able to confirm that, but I believe my colleagues from the PMPRB can. We do recognize that there's an uptake of new drugs and that the initial years of such uptakes do contribute significantly to price increases.

I'm not sure if I've got all the essence of your question.

The Chair: Mr. Ménard, excuse me.

Mr. Réal Ménard: Can I take the time of Svend Robinson?

The Chair: No, you're finished.

Ms. Bennett.

Ms. Carolyn Bennett (St. Paul's, Lib.): I'd like to follow up a little on Dr. Hill's line of questioning on the rising cost of drugs. As practitioners, we end up with these instincts that as the drug costs go up, other things come down. People haven't needed surgery, haven't needed hospitalization. I think of my parents. If it hadn't been for the anti-arrhythmic, they would have needed a pacemaker. Where is the comparison with what we're saving by having better drugs for things that once required hospitalization and surgery?

Ms. Barbara Ouellet: That information is very difficult to obtain. Intuitively, that's what we all do believe. The pressures on our hospital sector are such that any savings that result from better community-based disease management or drug therapy are offset by other pressures and other utilization of hospitals. So it's very difficult to identify actual savings associated with pharmaco-economic therapy. One of the indicators, though, that we are considering as part of the comparable review is to take specific diseases and specific new drugs--for example, drugs for asthma--and to try to measure the extent to which hospitalization has been avoided. One can interpret then, if this amount of hospitalization has been avoided, what would have been the costs associated with that therapy. But within the hospital sector itself the pressures on the acute care, the hospital's utilization of beds, and waiting lists are such that any savings are offset by other uses of those services.

So it is difficult to come up with an accurate financial impact, but we are trying to do it by looking at specific drugs and specific conditions and trying to get projects identified.

Ms. Carolyn Bennett: Another figure we also hear is that we're spending more on drugs than on doctors in this country. Is there any evidence that this is a bad thing?

Ms. Barbara Ouellet: I have no comment on whether that is a good or bad thing. Proportionately, it is true that--

Ms. Carolyn Bennett: As we put in seat belts, we put a bunch of neurosurgeons out of work. I still think that's a good thing.

I keep looking at some of the comparisons, and it seems to be a case of comparing apples and oranges. In a multidisciplinary system, why do we keep doing these kinds of things and then we can't actually tell how much money drugs are saving? We then end up with this idea that this is crippling us as a health care system in terms of drug prices.

With regard to the other piece that I think Dr. Hill was saying in the comment about minimal improvements over existing treatments, I have to tell you that in the days of tetracycline people had to take it an hour before a meal or two hours after a meal four times a day. I don't think any patient had finished 48 tablets after 10 days. The incidence of incomplete treatment was very much greater than now, when somebody can take one tablet of Vibramycin a day or two Biaxin. I guess I think that some of this is done in the laboratory and isn't actually done in practice. If you take an iron sulphate and it makes you feel sick, you tend to put the rest in the philodendron, as opposed to something that's got a coating on it that doesn't make you feel sick when you take it.

I'm just worrying that some of the stuff seems to be not really out there in practice. I think that's what we felt when we said on the optimal drug therapy panel in Ontario that some of the people making the decisions had never actually tried to write a prescription or get somebody to honestly tell them whether they've taken it or not.

The other thing I've always wondered about is this. If a company can design a really excellent release system for a drug or a chemical that's out there, why wouldn't that company be able to keep the patent for that excellent release system if the chemical or the drug is out there? Why is there a genericization of the release system instead of just the actual chemical, leaving everybody to try to figure out their own better release system? I think there are two different things I've always been confused about—what the patents are actually about.

¿ (0945)

Ms. Barbara Ouellet: Patents can be about many things. They can be about new chemical entities, but they can also be process patents, as you've described. I'm not an expert in patents, but I think certainly that if you'd like to know more about the Patent Act and what are allowable patents, that may be an area where you'd want to call witnesses. Certainly there are those kinds of patents, and as patents expire, then generics are allowed into the market. I agree with you that with respect to pharmaceuticals, although we've said they may not have breakthrough improvements, that's not to say that for some patients that particular drug is not more effective for them, even though it appears to only in general, across the drug class, offer minimal improvements. That's not to say that's it's not a valuable drug, not at all.

The Chair: Thank you, Ms. Bennett.

Mr. Barrette.

[Translation]

Mr. Gilbert Barrette (Témiscamingue, Lib.): Thank you, Madam Chair.

Mr. Ménard and Mr. Hill discussed the effectiveness of new drugs. Can any steps be taken to prevent drugs of questionable effectiveness from being marketed? The whole process can be rather onerous and this factor is listed on page 12 as a cost driver.

[English]

Ms. Barbara Ouellet: One of the things that the common drug review is obviously focusing on and what provincial and federal drug plans have been doing is to evaluate the effectiveness of the drug relative to other drugs. Efficacy is essentially established at two levels. When Health Canada reviews the drug for approval to the market, they will look at the clinical trial data and they will determine overall efficacy. Does this drug work? Does it do what it claims to do? At the provincial and federal plan level, the concern is this: is the action of this drug at least as effective or does it show some clinical or therapeutic effectiveness over and above existing treatments? So that kind of review is done, and that evidence is very important as plans take decisions about whether or not to list.

The other issue of course is, even if it's therapeutically effective, is it cost-effective? It may be as effective as another drug but cost considerably more or less, which then obviously makes a difference in terms of whether or not it's listed on the plan.

[Translation]

Mr. Gilbert Barrette: I have one last question. Do you intend to look into the excessively high costs of drugs that are either ineffective or marginally effective?

¿ (0950)

[English]

Ms. Barbara Ouellet: We are concerned about looking at costs and cost-effectiveness. From that point of view, we are attempting, as I mentioned in the best practices initiative, to ensure that the most effective drugs are in fact the drugs that are prescribed, and that they are used appropriately. That kind of analysis, I believe, should and will be part of the further work we will be doing on the analysis of drugs, both through the national prescription drug utilization information system with respect to all drugs, and certainly with respect to some of the non-patented drugs for which we're interested in studying price regulation.

The Chair: Thank you.

I have a small problem in that I have five minutes and I have five more names on the list, which would mean a 10-second question and a 50-second answer. Do you want to try it that way, or is there anybody who'd like to pull his or her name back? Good, Madame Scherrer.

Let's go now to Madame Fry, then Mr. Merrifield, then Dr. Castonguay, then Mr. Ménard, and about as quickly as you can, with no preamble—just your question.

Ms. Hedy Fry (Vancouver Centre, Lib.): No preamble; I just wanted to follow up on both Dr. Bennett's and Dr. Hill's questions.

I think it's interesting that you are still only looking at the cost-effectiveness evaluations of drugs. If you're looking at cost-effectiveness, you're not only looking at the cost, you're also looking at the efficacy—the effectiveness of the drug itself. It is interesting that you couldn't give Dr. Bennett the answers she asked for, or Dr. Hill the answers he asked for, because you haven't been looking at what interventions are being denied or stopped or how you're keeping people healthier with certain drugs and how that is in fact decreasing the risk of extreme morbidity. It is an important thing to do if you're going to progress in making any changes at all. Is this something you intend to do in a real way?

The second question I wanted to ask you, very quickly, is this. You said you're looking at baskets of drugs and the cost of baskets of drugs given by provincial governments. The big question for me is that generic drugs are being prescribed now almost exclusively, and the efficacy of some of those generic drugs is not high, we know, on certain patients; they are not useful. We're having patients who can't get the drugs they need because the plans won't pay for drugs that are really the best drugs. You are overriding many physicians' prescribing practices and concerns and the best interests of the patient. How are you going to fix that?

Ms. Barbara Ouellet: Contextually, the practice of medicine and the practice of pharmacy are within provincial jurisdiction. As a federal policy branch, it is not our responsibility to directly initiate or to determine which studies are undertaken and what plans—

Ms. Hedy Fry: But the decisions you make do that, in effect.

Ms. Barbara Ouellet: We work with provinces to try to get the best evidence we can. With respect to new initiatives, to this point generally all provinces have been responsible for their own interventions or decisions at the drug plan level. The common drug review is intended to improve the rigour and to give a common recommendation—essentially a common assessment—of the evidence. It's very easy to look at evidence and develop different conclusions from it. We will have a more rigorous, more common approach to assessing the evidence. With the COMPUS and best practices initiatives, we're assisting provinces in the interventions you've talked about to make sure those drugs are used.

The Chair: Mr. Merrifield, quickly.

Mr. Rob Merrifield: I want to leapfrog from that to the question of cost-effectiveness, or the cost of drugs, because you're looking at the efficacy of them relative to the cost.

I wonder if there are drugs that are not allowed into this country because of cost alone and how long it takes for you to do a review of those. I'm particularly thinking of some HIV/AIDS drugs that could potentially not be utilized in Canada because of cost. Can you tell me if it's a fact that this is happening?

Ms. Barbara Ouellet: No. When Health Canada does its review, cost is not at all involved in that review. It reviews the drug solely on the basis of its safety, its quality, and its efficacy; a drug would never be denied for approval for sale in Canada on that basis.

The Chair: Thank you.

Mr. Castonguay.

Mr. Jeannot Castonguay (Madawaska—Restigouche, Lib.): Merci, monsieur le président.

Again on your slide 12, when you say newly introduced drugs have minimal improvements over existing drugs “yet can cost significantly more”, why? What's the reason? Why do they cost more?

¿ (0955)

Ms. Barbara Ouellet: Well, new drugs in general tend to cost more than previous drugs; this is part of a trend we've seen. Basically, what we're saying there is that if one looks at the effectiveness data, they may be relatively comparable, but the cost of those new drugs is higher and those prices are set--

Mr. Jeannot Castonguay: This I understand, but why? Can we have a breakdown of why they cost more? At what level do they cost more?

Ms. Barbara Ouellet: We have cost data, but I think it's an indication of the market and the level of pricing at which the manufacturer attempts to introduce that drug, and in fact it's PMPRB that helps to determine that those prices are not excessive.

The Chair: Thank you.

Mr. Ménard, one last question.

[Translation]

Mr. Réal Ménard: I'm trying to understand something that no one has explained to us and that will likely come up in the steering committee. We've known about cost drivers for the past three years, but what criteria are used with respect to the issuance of a notice of compliance? How do we end up with three or four more expensive drugs with little in the way of new therapeutic value or that are used to treat the same illness? That's the question we need to address as parliamentarians.

The federal-provincial-territorial committee spent two years examining factors deemed cost drivers. These have been identified. I'd like to know which criteria are applied when it comes to issuing a notice of compliance.

[English]

Ms. Barbara Ouellet: If I've understood your question right, the answer is that I believe that with respect to the new drugs, as I've said, the prices are determined by PMPRB if they are patented. We know that these trends exist, and we have done the analysis--

[Translation]

Mr. Réal Ménard: That wasn't my question. Health Canada has nothing to do with pricing. When clinical trials are conducted and a notice of compliance is issued in respect of active ingredients, pricing does not come into play. Your mandate does not extend to pricing. How is that we've reached the point where notices of compliance are issued for drugs that basically make no difference in people's lives? According to your own figures, this factor constitutes the main cost driver.

Perhaps you don't have time to answer the question today and we may need to revisit this matter, but I don't feel that you have given us enough information this morning on the main question under consideration.

[English]

The Chair: I think maybe that question should be directed to someone else, because it has more to do with patents and the industry department, things like that.

On your behalf, ladies and gentlemen, I'd like to thank Ms. Ouellet and Mr. Lepine for coming and sharing their information, all the information you've put in your deck for us, which we will keep. There's always the possibility we'll ask you to come back as we gain a broader understanding of this topic, but for now, thank you very much.

We'll have a break as we change witnesses.

¿ (0958)

À (1001)

The Chair: Dr. Elgie, you have the floor.

Dr. Robert Elgie (Chairperson, Patented Medicine Prices Review Board): Thank you very much, Madam Chair.

I stand before you as a neurosurgeon who hasn't practised since the introduction of seat belts. The type of injury certainly has changed; it's not as life-threatening as it used to be.

I welcome the opportunity to appear before you this morning to address two key issues of particular interest to this committee, namely rising drug costs and mechanisms for reviewing and controlling prices of prescription drugs in Canada.

With me this morning are Monsieur Réal Sureau, vice-chairperson of the Patented Medicine Prices Review Board, and Wayne Critchley, the executive director of the Patented Medicine Prices Review Board. Following my introductory remarks I'd be pleased to join with the people at the table with me to respond to any questions you may have.

In seeking to address the issues raised by the committee, permit me to first provide a bit of context regarding the role of the board in regulating drug prices in Canada. We were created by Parliament in 1987 under the Patent Act as an independent, quasi-judicial tribunal, and the board protects consumer interests and contributes to health care by exercising a twofold mandate. One is a regulatory mandate to ensure that the prices charged by manufacturers--that is, the ex-factory prices for patent medicines--are not excessive. Second, we have a reporting mandate to inform Canadians about the price trends of patented medicines and of all drugs and to report on research and development performance as reported by the patent-holding drug manufacturers.

It's important to note that the board has no authority over the prices of non-patented drugs, including generics, and does not have jurisdiction over pharmacists' professional fees or any markups that may be applied by wholesalers or retailers, nor does it control what medicines are listed in provincial formularies.

Under the regulatory aspect of our mandate, we have put in place price guidelines in consultation with our stakeholders, as we are required to do by the statute. These guidelines are based on factors set out in the Patent Act, and these include the prices of other drugs in the same therapeutic class, the prices of drugs in other countries, and changes in the consumer price index.

More specifically, our guidelines, taken from those factors set out in the Patent Act, are as follows. The prices of most new patented drugs cannot exceed the price of the most expensive drug that treats the same disease. Second, the prices of most breakthrough or substantial improvement drugs cannot exceed the median of the prices in other industrialized countries that are set out in the patented medicines regulations; namely, France, Germany, Italy, Sweden, Switzerland, the United Kingdom, and the United States. Third, prices on a yearly basis cannot increase more than the consumer price index. And fourth, the price of patented drugs in Canada can never be the highest in the world.

The guidelines define “breakthrough” and “substantial improvement” for price review purposes, and we rely on the advice of the Human Drug Advisory Panel, which is an independent, scientific, expert group, in reviewing a new drug as a breakthrough or a substantial improvement over what's already on the market. The Human Drug Advisory Panel provides advice on all patented new, active substances introduced on the market.

Under the regulations, patentees are required to file price information on each strength of each patented drug on a regular basis for the duration of the patent, and the act authorizes the board to establish the price guidelines I have mentioned and provides the board with remedial powers. With respect to those powers, if, for example, following a public hearing the board finds that a price is excessive, it may order the manufacturer to reduce the price to a non-excessive level and it may order that excess revenues received by the company be paid to the Crown. In addition, in the event it is determined that there was a policy of excessive pricing, the board can order that the manufacturer offset double the excess revenues received.

À (1005)

Recently the board completed what's called the Remicade case by accepting a voluntary compliance undertaking agreed to by board staff and Schering Canada. This VCU benefited patients with an immediate price reduction of 20%, bringing the price of Remicade within the board's guidelines. In addition, Schering made a payment to the Government of Canada in the amount of $7.8 million to offset excess revenues.

Through the combination of regular filing and monitoring of price information, clear guidelines, effective remedial powers, and goodwill on all sides, the patented medicines review program has worked to achieve compliance of patented drug manufacturers with the act.

There is also a reporting function, and as indicated, we're responsible for reporting annually to Parliament on pharmaceutical price trends for all medicines in Canada. In addition, the board has specific responsibility to report on the research and development expenditures by patent-holding drug manufacturers.

In recent years our annual reports have shown double-digit increases in drug sales in Canada. In fact, since the board was established in 1987, retail spending on drugs in Canada has increased from about 10% of the total health expenditures to more than 16%. During this same period, total drug sales by manufacturers rose by close to 400%, reaching $13.1 billion in 2002. Sales of patented drugs have increased even faster. In 2002, sales of patented drugs increased 17.3% to $8.8 billion from 2001. Patented drugs now account for over 67% of total sales as compared with 45% in 1996.

While there's been a continuing upward trend in terms of drug sales in Canada over the past decade, it's important to note that this has been accompanied by a considerable moderation in the trend of drug prices. Recognizing this distinction between drug prices and drug costs is critical in achieving a more complete understanding of the larger picture. Price refers to the price of an individual drug, while cost refers to our total expenditures on the same drug. Changes in the cost of drugs are affected not only by price but, as you've heard from Ms. Ouellet, by utilization--the number of people also influenced by the number of people taking a given drug, the dosage and the duration of the prescription, the switch from an older drug to a newer drug, and other factors.

Since 1987, the average annual increase in the prices of patented drugs was approximately 0.8% or less than a third of the annual rate of increase of the consumer price index of 2.6%. Over this same time period, the prices of all drugs, as measured by Statistics Canada, increased by 1.7% per year, which was also lower than the rate of increase in the CPI. These trends contrast with the situation prior to 1987, when drug prices in Canada were increasing at a rate of approximately 50% higher than the CPI.

The board has also reported a change in the relationship of the prices of patented drugs in Canada with prices for those same drugs in other countries. In 1987, prices for patented drugs were 23% higher than the median of the foreign prices, but since the mid-1990s they have been close to or below the median.

As noted in our most recent annual report for the year 2002, the prices of existing patented drugs, which are subject to our guidelines, fell by 1.2% from the previous year. However, Canadian prices averaged 1% higher than the median of foreign prices. This certainly represents a change from the period of 1995 to 2001, when Canadian prices on average were 5% to 12% below the median of foreign prices, and we're currently investigating the reasons behind this shift.

The release of reports by the Romanow commission and the Kirby Senate commission early this year focused attention on a number of important issues relating to the role of pharmaceuticals in Canada's health care system. The underlying message of the Romanow report is the need for greater collaboration to address a number of key objectives, such as better integration of prescription drugs in the Canada's health care system while controlling costs; evaluating new and existing drugs and ensuring quality, safety, and cost-effectiveness; third, promoting consistency of drug coverage across Canada; fourth, facilitating objective assessment; and fifth, including medication management as part of our primary health care system.

À (1010)

These recommendations have clear implications for the board. We are continuing to pursue our mandate and the initiatives of our research agenda, particularly those directed toward enhancing the transparency of our price review process and its timelines. We are also involved in various studies of drug price and utilization trends and we are working collaboratively with governments, agencies, and other stakeholders.

A prime example of intergovernmental collaboration is the national prescription drug utilization information system, or NPDUIS. NPDUIS was established by the federal-provincial-territorial ministers of health as a partnership between the Canadian Institute for Health Information and the PMPRB. NPDUIS will be the first national database of public drug plans to allow analysis of drug expenditures and utilization. This information should be especially valuable in supporting policy-making in Canada.

For the PMPRB, the NPDUIS represents a natural evolution of research previously conducted under a memorandum of understanding between the Minister of Health and the PMPRB. Under the advice of the federal-provincial-territorial steering committee, CIHI will establish a drug database and the PMPRB will principally be responsible for conducting analytical studies.

Another major initiative, as was discussed by Madame Ouellet, is the common drug review established by the federal-provincial-territory governments and housed at the Canadian Coordinating Office for Health Technology Assessment. The CDR will provide a single national review of new drugs, including their cost-effectiveness, to allow drug plans to make listing decisions. The goal is to reduce duplication, maximize the use of limited resources and expertise, and enhance the consistency and quality of drug reviews.

Along with Health Canada's therapeutic review initiatives, the PMPRB program and the FPT initiatives all contribute to a common objective shared by governments, manufacturers, and, above all, patients to improve timely patient access to necessary medications at non-excessive prices. In order that improvements in therapeutic access not be upset by delays in the review of prices, the PMPRB has embarked on a major initiative to better align the timing of its price review process with the common drug review.

Finally, the PMPRB reflects the benefits and importance of increased collaboration by governments in addressing the challenges facing Canada's health care system. The PMPRB is committed to playing its part in supporting this process based on the goal of serving the health care needs of Canadians.

I'd be pleased to answer any questions you may have. Thank you very much.

The Chair: Thank you very much.

Mr. Merrifield.

Mr. Rob Merrifield: Yes, I'd like to go back to the question I started with to the last questioner regarding trends. Maybe you could give us your information with regard to trends and utilization.

À (1015)

Dr. Robert Elgie: What page are you on?

Mr. Rob Merrifield: I'm not worried about a page. I've got it marked here somewhere, but it doesn't matter. It doesn't make any difference.

I just want to know what you are seeing coming at us over the next five years. Is that trend going to increase as far as cost and utilization are concerned? Is it going to level off? How acute is it? Is the problem going to increase or not?

Dr. Robert Elgie: As you know, it's awfully difficult to prognosticate about the future. Certainly the past would tell us that not only in Canada but in all countries there have continued to be escalating costs in the double-digit range.

Will there be a change? Well, we're seeing fewer breakthrough drugs come to the market these days, so that will reduce some of the costs. But we're also seeing a number of things that are going to change costs as well, for instance, the demography of this country with an aging population. Persons like me who have hardly ever taken a drug in their life now take a drug. That's happening throughout society. That'll change utilization. I don't know, it may change the use of drugs.

For example, good clinical guidelines require that you start with the simplest, most straightforward of drugs. In the case of blood pressure, that would be Diuril. Then you move to the next drug to control blood pressure. If that has some bad side effects, you move to another. Who knows where we will end up with respect to the demography of the country?

Certainly there are illnesses that research is still going forward on to try to find medications that will treat them. Alzheimer's has some early drugs on the market, but there's still research going on in that area.

So I can't tell you. Certainly I can't see costs diminishing over the next five years. The issue is whether we can control the rate of increase.

Mr. Rob Merrifield: Thank you. I think you've hit on what we all sense, and that is that demographics of the country alone should drive costs, as the baby boomers get into the age where they start to hurt a little more and utilize more drugs, even if the price stays the same and even if utilization will be driven because of that. I appreciate that you at least acknowledge that.

If that's where we're headed, then, going back to the other question I asked with regard to price, your role is to look at those prices. Are we holding some products, some patented drugs, off the market in Canada on price alone?

Dr. Robert Elgie: Sorry. What was that again?

Mr. Rob Merrifield: Are there drugs not allowed to be sold in Canada due to price?

Dr. Robert Elgie: That provincial decision on whether or not they list them in the formulary may restrict the introduction of some drugs, but that doesn't mean they're not on the market. They may just not be in the formulary.

No, price on its own does not restrict access to the market. Whether it gets on a formulary is in the hands of the provincial government.

Mr. Rob Merrifield: How long does it take for you to do a price review?

Dr. Robert Elgie: It varies greatly. It can be a matter of a few days to a few weeks, and there are some that have been several months. That's why we're involved in a process to try to develop an agreed-upon timelines project. This means we have a working group of 12 persons, consisting of industry, consumer groups, and private payers, who all agree there needs to be a timeliness in our review process. We're in the midst of developing that now. We understand the need for that, and it becomes more imperative as we enter the era where there's a common drug review. We'll need to have the information on cost available for them.

Mr. Rob Merrifield: I know it's not part of your mandate, but going back to Réal's question with regard to what happens afterward at the retail level, you're monitoring those prices, I understand. Is that what you're saying? But it's not part of your mandate to control it.

Dr. Robert Elgie: We monitor the prices of all drugs at the manufacturers' level, the factory-grade level.

Mr. Rob Merrifield: Only there? Beyond that—

Dr. Robert Elgie: Beyond that, dispensing fees and retail-wholesale markups are the business of the provinces.

Mr. Rob Merrifield: Okay. It says you do not have jurisdiction.

My time's up. Thank you.

The Chair: Mr. Hill.

À (1020)

Mr. Grant Hill: Thank you, indeed.

I appreciate your testimony and I would like to ask a question about priorities. Do you review prices only on a first-come, first-served basis? Or is there anything that would cause a new product--say, an unusual product to come on the market--to be moved to the top of the list?

Dr. Robert Elgie: No, we don't formally try to prioritize them. They don't come in a hundred at a time. These are coming in one a week or one every two weeks. It's not a matter of waiting for a lineup and then prioritizing them. We're not seeing a whole bunch of patent applications coming up at the same time.

Mr. Grant Hill: But a new preparation that was exciting and that had maybe great potential you wouldn't put to the top of the list. It would go through the process.

Dr. Robert Elgie: It would go to the Human Drug Advisory Panel, and if that was what they said it was, it wouldn't be very long before pricing was completed. It would automatically receive priority because it would be such a straightforward situation. There wouldn't need to be what I used to call back-and-forth bickering about whether or not the price is sufficient.

Mr. Grant Hill: I hesitate to ask the chair of the PMPRB whether you should expand your mandate, but you've suggested that generics might be included in your mandate. From your perspective, do you think that's a reasonable thing for the PMPRB to do, to expand its mandate to include generics?

Dr. Robert Elgie: Well, it would certainly require an organization that expanded significantly.

I know when we were involved in a cross-country tour over issues related to the PMPRB, several provinces considered delegating that authority to us. One of them was a western province where actually the minister attended and offered to do it. It was the only province that did.

I don't know if that means there's an unwillingness to give that up or not. All I can say is that if we were asked to by the government and the authority was delegated to us, then we would certainly have to do it, and we would do it as best we can.

Mr. Grant Hill: I'd like to refer you to your newsletter, and this is volume 7, issue 3.

Dr. Robert Elgie: What date is that?

Mr. Grant Hill: On page 3 you have two graphs, figure 1 and figure 2. In figure 1, you'll note that Canada's pharmaceutical expenditure as a share of total health care expenditure has gone up from 1990 to 2001 roughly 5%. If I look across this graph, I see one other country that has a fairly comparable rate of increase, which is Sweden. The other countries do not have such an increase. What is the difference between Canada and Sweden and these other countries? Have you identified why these two have gone up fairly significantly?

Dr. Robert Elgie: Of course, each of them have different mechanisms through which they try to control expenditures on drugs. France has developed a very complex negotiating system, and it's involved very diligently in purchasing arrangements on a single country basis. They say, we'll pay for this amount of drugs and that's it, and here's the price that will give us that number. Some countries use very different approaches to try to control those prices through purchasing power. Some use reference pricing. Many countries, including this country, use price-volume agreement to try to control things. It's a matter of all the tools they have as governments with the constitutional authority at the central level to deal with those matters.

Mr. Grant Hill: If I were critical of the PMPRB and looked at those countries--I shouldn't say it so categorically--

Dr. Robert Elgie: Oh, speak out. Be frank.

Mr. Grant Hill: --I might conclude that as a percentage of total health care expenditure, you haven't done a marvellous job. How would you respond to that allegation?

À (1025)

Dr. Robert Elgie: I think that when you go back to the thoughtfulness of your office and review things, you'll agree that we've lived up to the mandate we were given.

Mr. Grant Hill: If we go to figure 2--

Dr. Robert Elgie: Are we still in your office or are we here now?

Some hon. members: Oh, oh!

Mr. Grant Hill: I hope to get--

The Chair: Mr. Hill, I'm sorry to interrupt, but your time is up.

Mr. Ménard.

[Translation]

Mr. Réal Ménard: Thank you, Madam Chair.

We understand each other very well. Your mandate extends to the ex factory price only, not to the retail sales price.

I have three short questions for you.

According to the pharmaceutical companies, governments believe that research cycles are the cause of drug price increases. We're told that anywhere from $800 million to $900 million is spent from the time a molecule is isolated and an actual product is marketed. I'm not talking about the patent process. Would you say that these figures are accurate?

Another cause for concern is the promotional techniques used by pharmaceutical companies. This isn't necessarily your bailiwick, but it does concern you to some degree. Pharmaceutical companies have even gone to Federal Court to challenge your authority.

Do you agree that one way of controlling drug costs would be to restrict the promotional methods employed by pharmaceutical companies? For example, you could maintain a register and all pharmaceutical companies could be required to report all drug samples distributed to physicians, CLSCs and health care professionals. Do you see any connection between the promotional practices of pharmaceutical companies and actual drug costs?

Thirdly, there are those who argue that the scope of your regulations need to be expanded, that countries like Australia, for instance, should be included for comparison purposes.

[English]

Dr. Robert Elgie: Thank you very much, Mr. Ménard.

I'll deal with the last question first. It's often suggested that we should include Australia and New Zealand in the comparisons. That's not in our jurisdiction to do, as you know. The regulation would have to be changed to add other countries to that jurisdiction, and you'd hear quite vigorous arguments from the industry that you should be adding the higher-cost countries as well.

When Dr. Eastman established the principle of the median, it was that the median overcame a lot of those problems. If you're going to add a low-price country, you have to add a high-price country. You still haven't changed the median. If you want to add only low-price countries, that's a political decision that governments will have to make. But that's not the case now. The case now is this basket and the median of that basket. But can it be done? Certainly. A government, by regulation, could add other countries to the basket.

[Translation]

Mr. Réal Ménard: However, there's a reason for thinking that. Your presentation implies that drug pricing in Canada is regulated, whereas clearly, according to the Kirby, Romanow and Clair reports, that's not the case. There's a marked difference between the ex factory price and what hospitals and public health insurance schemes pay for drugs. The price public authorities pay for purchasing drugs in Canada is not controlled and that's why it's important to have a basis for comparison. However, I understand that changing the regulation is not your responsibility.

In terms of the second part of your mandate, namely the research carried out by the pharmaceutical companies, are the figures quoted in fact accurate?

[English]

Dr. Robert Elgie: Let's go back to the other one. I think you're doing the provinces a disservice, because I think they do release the dispensing fee and they do set the allowable markup from retail business. So there is some control exercised at the provincial level on the ultimate price.

[Translation]

Mr. Réal Ménard: Yes, but the dispensing fee isn't the only factor that determines drug costs. It's more complex than that because of all the intermediate stages in the process. Pharmacists maintain that the dispensing fee accounts for 3 per cent of the total cost. However, you're correct in saying that the provinces pay for drugs the cost of which is refunded. The federal government has no say in this matter.

As far as the research aspect is concerned, does it in fact cost between $800 million and $900 million to market a new drug in Canada over a ten-year period?

[English]

Dr. Robert Elgie: Well, that's the figure that's been produced by a study group in Boston, I forget at which of the universities there, and that's the figure they've produced. It's challenged by others, but certainly that's the one that's been published and publicized. And it takes into account not just the research for that molecule but the failed research dollars, the R and D that has gone in.

À (1030)

[Translation]

Mr. Réal Ménard: However, you closely scrutinize the R & D activities of pharmaceutical companies. Not many Canadians are as closely involved as you are in the R & D activities of the pharmaceuticals industry. Is the figure of between $800 million and $900 million that was quoted credible, or should it strain our credulity?

[English]

Dr. Robert Elgie: I'm not able to answer that question. Indeed, there was a case back in 1981 on that very issue--I can give you the reference if you wish--and it required testimony from several people who investigated all the studies that have been done in the world. We haven't done that.

The Chair: Thank you, Mr. Ménard.

Ms. Fry.

Ms. Hedy Fry: Thank you very much, Madam Chair.

I wanted to ask a couple of questions of you, because I think I have been hearing various things, and I want to clarify them.

You treat all new drugs...if they have a substantial improvement. You've applied that criterion, “substantial improvement”, to allow for price increases. How flexible is that price increase allowance for, say, drugs that do not have substantial improvement in your criteria right now but, for instance, have incremental improvement? These are things like where a drug that used to be taken four times a day is now going to be taken once a day or where a drug that had to be taken without food may now be taken with food. There has to have been some research to be able to allow for those kinds of improvements. Is your pricing flexible enough for you to look at that? And I'd like to know what your criteria are for “substantial improvement”.

You've been asked a lot about generics, and you've made a very important point about the price of drugs versus the cost. I think we know the cost of drugs, cost to the system, and the price of drugs must be interrelated. Utilization, for instance, drives costs, and utilization over the last 15 to 20 years has gone up mainly because of an aging population and mainly because we are able to treat things with medication that we used to use surgical and other intervention for. We also know, for instance, that there are 4,000 new cases of HIV/AIDS a year, so we can see lots of other drivers that are affecting costs.

Most important, in the provincial jurisdictions generics are generally the drug of choice, and if you don't have generics involved in your particular board, if you're not looking at generics, then you're not really looking at costs. If generics are not looked at in terms of efficacy and are not looked at in terms of prices, then the cost can go up, because you're using more and more generics. That would, for me, be an important reason for you to bring generics into your mandate.

So I wanted to ask you about both of those things, bringing generics into your mandate, because I think it will affect costs and, although I know you're not allowed to look at it, the cost of the pharmacists' fees, for that is a driver of costs as well.

I think that, given that you look at one clearly boxed-in place and that the provinces look at another, if we're really going to talk about the new concept of looking at something that is pan-Canadian, where the federal government and provinces are working together to look at keeping the costs of pharmaceuticals down and at keeping the accessibility of them up, don't you think there needs to be a broader mandate for you and that you need to look at how you work with the provinces, where you look at drivers of costs, such as pharmacists' fees, generics, utilization, and other items like that as well? And I think we asked earlier on about outcomes in terms of efficiency and not just price and costs in terms of the efficiency of a drug.

So that's my question, as well as the one on your substantial improvement question and what your criteria are.

Dr. Robert Elgie: Well, the Human Drug Advisory Panel consists of very talented people. I'm just amazed at the number of people who take part in this process, the kind of talent they have, and the time they give. The Human Drug Advisory Panel tells us whether a drug is a substantial improvement or a breakthrough.

À (1035)

Ms. Hedy Fry: What are your criteria?

Dr. Robert Elgie: We leave that to them.

Category 3 medicines are drugs that have no, little, or even moderate improvement, and that's a difficult issue. As I mentioned earlier, we had a committee of 12 persons, including the industry, consumers, private insurers, public insurers, and health care groups, and they wrestled with this very issue of whether, if some value is added, shouldn't the price be increased a bit? Nobody could define value for us, nor could they reach an agreement on what value was, but they did ask us to explore whether or not value should influence the incremental increase in price if there was an incremental improvement.

I have to tell you it's not easy to do those things. Arguing whether something is 5% or 10% better than something else is a difficulty that I'm sure you and I would both have were we practising actively. So I don't know whether we'll be able to come up with anything that's useful and that still allows us to carry out our mandate in a timely way. We don't want a situation where there are more and more arguments about whether it's a little improvement, a slight little improvement, or a modest little improvement. That would be an interminable case or situation for us, one that could paralyze us. We have to have simple, straightforward rules for us to categorize drugs and make sure they're not excessively priced.

Should we be looking at generics? Well, I think I've tried to discuss that. If the governments of the country were to ask us to do that, we'd take on the obligation. It would be a much different job; it would add a lot more workload, but we'd be prepared to do it if that's what people wanted.

Ms. Hedy Fry: With regard to my first question about efficacy, I think it is certainly very difficult to tell whether there's a 5% improvement or not. However, patient compliance has a huge impact on the efficacy of a drug. We know that a lot of patients don't want to take drugs three or four times a day, and if they can have a drug they can take once a day, that surely is a substantial improvement in terms of efficacy of the drug. So there might be ways to measure efficacy other than from the perspective of whether the drug itself has been improved in its substantial efficacy. Its impact on the patient may be one way of looking at efficacy, and I wondered if that is something you do. If you don't, is it something you would consider doing? I think it is an important piece of the outcomes of drugs on patients' mortality and morbidity.

Dr. Robert Elgie: I think we do take things like novel delivery systems into account, and a drug could well be considered a category 3 instead of a category 1; category 1 is simply a different dosage of the same drug. But if there was some unique and useful approach to administering it, then that could well be something that makes it a category 3 drug, and it would therefore get a different pricing.

The Chair: Thank you, Ms. Fry.

I have a couple of questions of my own, if my colleagues will allow it.

Dr. Robert Elgie: Take charge.

The Chair: Your newsletter of July 2003--and I think this is what Dr. Hill was looking at--discusses pharmaceutical expenditures as a share of total health care expenditures and as a share of GDP. I'm concerned about the countries we have chosen to compare ourselves with. I'd be interested to see a second or third world country in there, because is it not true that most of these countries we compare ourselves with have pretty strong pharmaceutical industries? Therefore, is it not possibly in their own national economic interest not to have low drug prices because the higher drug prices help to sustain what is a pretty important industry in their country?

Dr. Robert Elgie: Certainly we've seen over the past few years a move of several large industries from Europe to the United States for those pricing reasons you've talked about, but in a country like the United Kingdom, which controls profits, not prices, they've managed to do pretty well on their own with respect to costs.

So who knows? Who knows whether or not we'd be better off adding countries that have different situations?

À (1040)

The Chair: That don't have a vested interest, in other words.

Dr. Robert Elgie: As I say, how do you pick them? Every time you pick a low-price country, someone is going to say, well, you have to pick a high-price country to match it because you're always searching for the median. That's a decision for the government to make as to whether or not it wishes to show that kind of interference in the selection process.

The Chair: I'm also interested in this chart on page 52 of your annual report, R and D expenditures by type of research. It seems to me that at the time of your founding, the government of the day was trying to tie down some of the profits taken out of the country by pharmaceutical companies, especially foreign-based ones, by trying to extract from them promises for more research and development, this to the point that today we have one group of pharmaceutical companies calling themselves the R and D companies.

But over the years many people have expressed concern that so much of the research those supposed R and D companies do is actually practical research on Canadians; in other words, clinical trials. I noticed that in 2002 the applied research--that is, pre-clinical trials and clinical trials--accounted for a total of 55% of all R and D, and other qualifying R and D was 26.8%, and the other could include drug regulation submissions. But the real research, the research conducted in laboratories and creating high-priced jobs, was still at only about 17%.

Now, are you able to put any pressure on these pharmaceutical companies to use some other countries for their clinical trials and bring more pure R and D to Canada?

Dr. Robert Elgie: I hope it's not one or the other.

The Chair: It might be nice if it were fifty-fifty, as opposed to seventeen-eighty something.

Dr. Robert Elgie: Although, again, it's not part of my mandate. I'm one of those who feels very strongly that moneys put into basic research, which is what you're talking about, affirms that there are some roots in this country for our children that they'll ultimately get good jobs in.

The Chair: Exactly, yes.

Dr. Robert Elgie: I'm discouraged that we're seeing those numbers, but that's not something I can correct. But I can comment on it, and perhaps what you and I are talking about today will have some moral suasion. Who knows?

The Chair: Perhaps when this committee reports on prescription drugs and, indirectly, on the pharmaceutical industry, it would not be beyond our mandate to comment that we don't think all these clinical trials should be in the same category of research as the pure research. Certainly the submission for drug approvals--in other words, the money they spend putting together these packages asking for approvals--to me, is not research at all. That's simply an administrative business of that company. It's a regulatory requirement. So why they get credit for that as R and D, I'll never know.

You agree with me, then, that it would be preferable for us to have more of these pure research R and D jobs and a higher percentage done in this country. I would pose to you the possibility that the reason we don't have those jobs is that so many of the head offices are based in these exact countries and they want to hold on to those jobs and, instead, try to build up R and D credits with us by trying their products on Canadians. What do you think of that?

Dr. Robert Elgie: First, I do agree that we should encourage more money in basic R and D. I would not agree that we should have a trade-off and the trade-off for that is to reduce our applied research, our clinical trials, because our physicians and our hospitals find that a very interesting and valuable thing for them to do. So I wouldn't agree with the trade-off, but I do agree with the principle that it would be valuable for Canadians to see more money going into basic research.

How do we handle all this? We constitute about 2.6% of the overall global market in drugs and we don't get back in R and D 2.6% at this time. I doubt we'll ever have a major head office here, but who knows? With innovative practices for innovative industries, who knows what might happen? The Australians have just introduced an innovation fund in order to try to improve their R and D expenditures in that country, so who knows if that can happen?

À (1045)

The Chair: Thank you very much.

Mr. Merrifield.

Mr. Rob Merrifield: No, that's fine.

The Chair: Oh, you're fine.

Ms. Bennett.

Ms. Carolyn Bennett: I want to follow up on this conversation because, as you know, I misbehaved and was on the phone. In terms of what you were saying, the difference between controlling prices and controlling profits, I guess I'm still not clear. In controlling straight prices, is there a deleterious effect on people wanting to do innovation in this country, or wanting to discover things here, if this is the jurisdiction where the prices for sure will be controlled?

Dr. Robert Elgie: You will have read the annual report and you'll know there are many European countries that have much lower prices than ours. If it's a problem for anyone, I suggest it's because of where we are. We're in North America and we're next to what is called the elephant, and every time the tail moves or the ear flaps, we get hit. I don't think it's something that our pricing has anything to do with, because other countries are pricing things lower and those issues aren't there.

Ms. Carolyn Bennett: In the percentage of breakthrough products that they get versus us, are they higher?

Dr. Robert Elgie: No, I don't think that's right. I think--

Ms. Carolyn Bennett: So what public policy would help us get breakthrough products here?

Dr. Robert Elgie: We get breakthrough products here.

Ms. Carolyn Bennett: But not that many, in the annual report.

Dr. Robert Elgie: That's universal. The number of drugs that are coming through the pipeline is shrinking. We're entering into an era of new drugs, as you know. They will be very expensive, I hear.

The Chair: Seeing no further hands, I'd like to thank Dr. Elgie and his colleagues for coming to us today and for the good work you do for the country all the time. We may have other questions for you. I assume you would be free to--

Dr. Robert Elgie: Any time. It would be my pleasure.

The Chair: Thank you very much.

There is another meeting coming in here at 11 a.m., committee members, but I should report on where we are with our committee business. This has to do with our travel next week.

The schedules for next week are almost ready; however, the clerk has tried to confirm some of the witnesses since last Thursday and has been unable to do so. He doesn't want to finalize the list until he has reached everyone. You should be receiving your completed schedules probably by Thursday. The people who are travelling should be receiving their per diem cheques and flight tickets today or tomorrow.

The clerk has not yet received any suggestions for restaurants for group dinners in Vancouver, Saskatoon, or Winnipeg. If you have any ideas, please get them to him.

These are messages from the clerk to you.

Mr. Merrifield pointed out an error that was made last week and he is absolutely right. We did get permission for ten people to travel--five government members and five opposition members, of whom two will be from the Alliance.

I'm not sure who has put their name in. Do you have a list now?

The Clerk of the Committee (Mr. José Cadorette): Of those who are travelling?

The Chair: Yes. We don't know who that is. Would you tell us who that is?

The Clerk: Yes, there is Mr. Castonguay. I don't know the list by heart. I don't have it here.

The Chair: This means they don't know if they're travelling, I don't know if they're travelling, and you don't know. Who knows?

The Clerk: The logistics officer received from the members who wanted to travel all of the completed forms and--

The Chair: And he has five from the Liberals, does he?

À (1050)

The Clerk: Actually, four, I believe, at the moment.

The Chair: Well, that's the whole thing.

Something was sent out to your offices to say please indicate if you want to travel on these trips.

Ms. Carolyn Bennett: I think that's--

The Chair: Don't feel bad. I missed it.

Ms. Carolyn Bennett: I've never, ever had that happen before in my life.

The Chair: You've never had what happen? You've never received a form?

Ms. Carolyn Bennett: Well, the committee either travels...the committee is either split.... I didn't know there was some.... Anyway, am I travelling or not?

The Chair: I don't know, because he hasn't got the list here. But we don't think we've received anything from you about this.

Ms. Carolyn Bennett: I don't think my office knew. I don't think we read it carefully enough, then. I've no clue.

Ms. Hedy Fry: Madam Chair, I wanted to actually speak to this issue. Yes, indeed, we did get something in our offices. By the time we got it, there was a 48-hour return on it. It was very ambiguous. Nobody knew what it meant. When we called to find out what it meant, we were told I wasn't on the list because I hadn't indicated that I wanted to be. But it wasn't clear that this was what that message was about.

Secondly, Madam Chair, I know that if we only have 11 people to travel.... In the past in most committees I've been on, we've rotated the travelling group so people in the west travelled in the west, people in the east travelled in the east, and people in the centre travelled in the centre. That gave every member an opportunity to be on a group of travel.

You didn't get any restaurants in Vancouver because the Vancouver riding is not on your travel list.

Ms. Carolyn Bennett: So you're going get a whole bunch of committee members who have not heard any of the hearings.

Ms. Hedy Fry: It's cheaper for me to stay in Vancouver. You don't have to pay for my travel. I'm living there. I mean, we need to think of these things when we're setting up these kinds of arrangements, but simply to send something on an e-mail in the middle of summer with a 48-hour turnaround and then to say that we're not there actually annoys most of us. It should not have been done in that way.

Ms. Carolyn Bennett: Without a call to follow up if you haven't heard from us. I mean, come on!

Ms. Hedy Fry: I don't insist on going anywhere else, but I think it would be reasonable for me to be on the west coast travel.

The Chair: Absolutely. I assumed you would be there in Vancouver.

As I said earlier, I don't even know who is on this list. I've never seen a list of names.

Ms. Carolyn Bennett: It's on my schedule that I'm going, but I'm not going. It's on my schedule that I'm going.

The Chair: You may be going, because we thought only eight would be allowed to travel. That is what I understood from the liaison committee was the new limit on travelling. But apparently Mr. Merrifield was correct that somehow or other the motion that went through the House was for ten.

Ms. Carolyn Bennett: But it could be a different ten going west. How can anybody--

The Chair: I understand that, because I didn't see the thing either, nor did I return it. So the whole thing went over everybody's head; it was totally missed.

Ms. Carolyn Bennett: So are the people who never come to a meeting the ones who are travelling?

The Chair: No, no, please. There is no attempt to construct who is travelling. All I know is that a notice went out--

Ms. Carolyn Bennett: Other than passive aggressively, and it's happened. I mean, this is ridiculous. This is not the way you run a railroad. Come on--you don't hear back from an office and you don't call?

The Chair: I think probably the government members should have this conversation after the meeting.

I'll now adjourn this meeting. Thank you.